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The Story Of The Frequent Flyer Club

The very first Frequent Flyer programme was launched in Melbourne by Ansett Airlines of Australia in 1990 Tom Dery, the Marketing Director of the airline (and when I last heard,
02 Feb 2019 10:00
The Story Of The Frequent Flyer Club

The very first Frequent Flyer programme was launched in Melbourne by Ansett Airlines of Australia in

1990 Tom Dery, the Marketing Director of the airline (and when I last heard, Chairman of M&C Saatchi SE Asia) had an idea for a Loyalty Program that would encourage the airlines customers to give priority to Ansett.

Ansett Golden Wing Club

I was handling Ansett advertising, so got roped in along with the man who was to pull it all together, Brian Skirving.

The concept involved a club which the customer joined by paying a fee.

This entitled members to all the benefits provided.

The programme was called the Ansett Golden Wing Club.

Airlines had always had a form of lounge where invited guests were allowed to wait for their flights in comfort, but the Membership was small and was by invitation only.

These lounges catered to first class passengers, politician, VIPs and friends of the Chairman.

Membership was never formalised and the lounges basically provided a place to wait in private for the flight.

The idea of the Golden Wing Club was different.

Firstly, it was open to anyone who paid the annual fee and it awarded points based on distance flown for each flight that could be redeemed once a sufficient number of points were collected.

Card entry system

Each member held a card with an individual number and all trips were recorded and credited to that member’s account.

The card also granted entry to airport lounges throughout the airline network.

Eventually these lounges existed in every capital city airport and a number of other secondary ports and were placed within the Airport Terminal.

They were large and comfortable and provided a free bar service, a snack service and café with tea and coffee.

There were showers and toilets, a pressing service, hairdressers, and masseurs.

The flight desk in the lounge could make or rearrange bookings, provide taxis, rental cars or bus service to the CBD.

Using the Membership Card the member could also get points for many other services such as hotels, restaurants, hire cars, and even holidays.

There was a Car Valet service where members could drive to the front of the Terminal and hand the keys to an attendant who would park the car, bringing it back to the terminal when the members return flight landed.

While away, the car could be washed and polished, all at a price.

You could earn points by buying from partners, staying at partner hotels, going to partner football matches or golf clubs and eating at partner restaurants.

Everytime the Club provided something it made a little bit of money.

We even ran the second largest art gallery through the lounges, we had developed a whole new industry.

When Ansett fell over (through no fault of the programme) the idea had spread widely and most international airlines had a Club in some form, but none understood it as well as Qantas and they have taken it further and developed it with skill and it is now a very important part of their business.

It has not always been so and in 2012 it actually made a loss, but since then it has consistently delivered growth.

2020 for Qantas

By 2022 the Qantas programme is expected to underpin a jump of fifty percent in the brand’s stock price, according to Qantas’ chief executive officer Alan Joyce.

By 2020 it will be the biggest contributor to the brands profit, surpassing the airline operations.

The process is very simple.

Partners buy Qantas points to reward their own customers for their loyalty.

The cost to Qantas is lower than the money they sell it for, so there is a margin of profit on every point. Partners can be in a vast range of businesses such as hotels, restaurants, but more unexpected ones such as golf clubs, clothing retailers, womens’ fashion, yoga classes, health insurance, groceries and wine and even kitchen ware.

Qantas shares have jumped forty-five per cent this year and the company is now valued at nearly nine billion dollars.

Credit Suisse Group estimates the worth of the programme company alone at around four billion dollars which is more than Qantas’ international airline business.

There are over twelve million members currently and these members amass points every day from travel as well as purchases from the Partners of the programme.

The Qantas Loyalty Programme has actually moved out from the airline, and is a business in its own right.

The appeal to members is enough to stop them from seeking better airline ticket deals and keeps them flying on the Qantas brand.

In fact, what Qantas has done is taken a brand benefit and made it almost primary in term of brand decision making.

The 30-year-old programme is certainly partly driven by the very strong brand preference for Qantas.

There needs to be sufficient redemption seats across a broad range of destinations to fill demand so that members see the benefit in accruing points, but many card holders do not get around to redeeming points, which expire if not used within a certain time.

In Australia, Qantas offers cobranded credit cards which account for over a third of all credit card purchasers, significant in a market which totals over $300 billion a year.

It is rumoured that Qantas will release its own card with Citi group this coming year.

In 2016, frequent flyers earned more than a hundred and 20 billion points and redeemed almost

five million flights, which is basically incremental business for the airlpine.

Qantas carries around 51 million passengers a year.

With a disclosed profit margin of 24 per cent the Loyalty programme is three times more profitable than the aviation business and over twice as lucrative as the domestic division.

The program also helps Qantas flatten out seasonal movements in the airline business as the loyalty business moves along nicely all the time, with very little fluctuation.

In the early days of the frequent flyer clubs there was a problem with contingent liability because members could turn up at any time

to redeem points, but Qantas has overcome this by putting a time limit on validity of the points, after which they expire, and of course the cash goes back into the business.

For a business that did not exist before the 1990s, the frequent flyer loyalty programmes have turned into big business.

Today almost every airline offers some form of the concept and there are a number of third party operators who also offer schemes, but no one does it better and more profitably than Qantas.

Feedback: maraia.vula@fijisun.com.fj

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